A Bad Week for Paul Manafort and School Scammers -- But a Great Year for White-Collar Crime

AP Photo/Alex Brandon

Paul Manafort leaves Federal District Court in Washington. 

Going strictly by recent headlines, one could be forgiven for thinking it’s a bad time to be a white-collar criminal in America. Last week, former Trump campaign manager and grifter extraordinaire Paul Manafort was sentenced to seven years in federal prison for financial and fraud convictions; the very next day, Justice Department prosecutors charged at least 50 people involved in a multimillion-dollar bribery scheme to get unqualified children into elite universities. 

Justice served, right? Not exactly. 

The unfortunate truth is that white-collar crime has always been relatively low-risk, high-reward in the United States—and under the Trump administration it’s become an even better racket. Grifting has entered a new golden age. 

A new case-by-case analysis of Justice Department data shows that white-collar crime prosecutions have dropped to an all-time low this year. The government reported only 337 new prosecutions in January, a 20 percent drop from December, according to a report by Syracuse University’s Transactional Records Access Clearinghouse (TRAC). The recent drop continues a particularly precipitous five-month slide under the Trump administration. While it’s not unusual for prosecution totals to fluctuate some, the January figures are abnormally low—about 5 percent lower than reported prosecutions in January 2017 and nearly 36 percent lower than in 2014 (monthly tracking of such crimes began in 1998). 

White-collar crime includes antitrust violations, identity theft, arson for profit, and fraud—lots and lots of fraud: Tax fraud, of which Manafort was found guilty; mail fraud, which celebrities in the college bribery scheme have been charged with; securities fraud, bankruptcy fraud, and insurance fraud, to name just a few. White-collar criminal charges can be brought against both individuals and businesses. 

The Trump administration has also overseen a steep fall in the total amount of corporate penalties from federal prosecutions. In the first 20 months of the Trump administration, the Justice Department collected nearly $10 billion less in corporate penalties than it did during the Obama administration’s final 20 months, according to a recent New York Times analysis of federal enforcement activity at the Justice Department. The report found a similar decline in civil penalties against financial institutions during that period. 

Legal experts have suggested that the drop in enforcement could be explained at least in part by a zooming stock market and improved economy, as misconduct is often easier to spot during economic downtowns. But the slump in white-collar enforcement also reflects the Trump administration’s overall lax approach towards corporate policing, as well as its efforts to prioritize violent crimes, drug offenses, and immigration. 

Under former Attorney General Jeff Sessions, the Justice Department loosened departmental guidelines on corporate wrongdoing. It championed voluntary disclosures of wrongdoing rather than corporate prosecutions. 

As Deputy Attorney General Rod Rosenstein put it in his speech last year at the 32nd Annual National Institute on White Collar Crime in San Diego, the Justice Department “will not employ the hammer of criminal enforcement to extract unfair settlements” from corporations. 

When it comes to other kinds of crimes, however, the Department has been happy to indulge its harsh pro-prosecution instincts. During his tenure, Sessions issued memos declaring an open season on the marijuana industry and directing prosecutors to pursue the most serious charges possible for defendants facing drug charges. Federal prosecutors were also instructed to prioritize immigration-related offenses to “further reduce illegality.”

While the number of white-collar criminal prosecutions has gone down under Trump, the total number of federal prosecutions has actually increased, largely thanks to ramped up immigration enforcement. According to TRAC, nearly 61 percent of all prosecutions brought forward in fiscal year 2018 were for immigration offenses. Narcotics prosecutions were the second single largest category of prosecutions with 13 percent. In its single-minded focus on prosecuting unlawfully present people, the administration has diverted resources from prosecuting gang members, drug smugglers, and human smugglers near the border (not to mention white-collar criminals).

Then there’s the matter of the severe underfunding for the Internal Revenue Service, which is one of the most productive investigative agencies when it comes to detecting white-collar chicanery. The gutting of the IRS began in 2013, at the behest of Congressional Republicans, and has continued into the Trump presidency. With a shrinking budget and a depleted number of auditors on staff, the agency has been unable to keep up with its oversight duties. 

The number of IRS referrals of taxpayers for prosecution relative to population size has declined by more than 60 percent in the last five years alone, according to TRAC. Fewer than 1,000 taxpayers were convicted as a result of an IRS referral in the last fiscal year, an all-time low. 

All these factors combine to create fertile ground for fraudsters, but the White House doesn’t appear all that bothered. The Mueller and congressional investigations could reveal that Trump himself is no stranger to tax evasion—in its own way, his presidency may yet confirm the fact that white-collar crime still pays in America.

Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.

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